Hold the phone: retailers eye payments via smartphone

An emerging technology called Near Field Communication will soon give new meaning to the phrase "tapped out."

An emerging technology called Near Field Communication will soon give new meaning to the phrase "tapped out."

Once NFC systems become widespread, which could happen as soon as next year, consumers will be able to pay for purchases at the checkout counter by simply tapping their cell phones, rather than digging out a credit or debit card and swiping it. So, what's the big difference?

The idea behind contactless payments is not necessarily to make things faster or more convenient for the consumer, it's actually a way for retailers to be able to deliver advertising messages, coupons, promotions and loyalty programs directly to your cell phone.

If that prospect appeals to you, stay tuned.

Most of the new smartphones coming out will be ready for contactless payments by dint of being equipped with the NFC chip, and a second chip, the "secure element," for the payments themselves.

And the manufacturers who make the check-out terminals are busy adding NFC capability to all these point-of-sale devices, so that as stores upgrade, they'll become ready to accept NFC payments.

Multiple moving parts

In order for contactless mobile payments to become a reality, several pieces have to come together. Consumers have to have NFC-capable phones. Retailers have to have NFC-enabled checkout terminals. Cellphone manufacturers have to install the NFC chips. Banks and other financial institutions have to support the NFC payments. And the cell phone companies are in the game as well, looking for a slice of the payments pie.

Normally, this would create a huge chicken-and-egg bottleneck. But, this time, all the major players seem to be moving in the same direction, even though they're not all taking the same roads to get there.

Several mobile carriers, for example, have banded together in an attempt to control NFC payments. AT&T, Verizon Wireless, and T-Mobile USA are backing the Isis payment platform, and have already received the support of most of the top handset manufacturers and major credit card companies.

According to Jeff Miles, vice president of mobile transactions at NXP Semiconductors, the company that makes almost every NFC chip, there are now more than 130 different phone and tablet models in various stages of NFC deployment, totaling more than 40 million devices.

"We're seeing the beginning of the hockeystick to the phones out there," he says.

Google Wallet, a competing NFC payments platform, is already available on the Nexus S mobile phone on the Sprint network, and can be linked to Google's own prepaid payment card, or to PayPass-eligible MasterCard credit cards from Citibank.

It's likely that Apple will soon come out with its own payment platform for the iPhone.